We're back with more thoughts of #AdamSmith about the tools of mercantilism. Today: Bounties! (IV.v.) #WealthOfTweets #SmithTweets
Today we'd call bounties subsidies, which makes it much harder to use a Boba Fett gif.

So we're sticking with bounties. (IV.v.a.1) #WealthOfTweets #SmithTweets
Everyone admits, says Smith, that bounties shouldn't be given to industries or endeavors that could happen without them. But that means you're only going to give them to endeavors that can't pay for themselves. (IV.v.a.2) #WealthOfTweets #SmithTweets
If you pay people to carry on doing things that don't pay for themselves, capital ends up being consumed by the things that they're doing. They get poorer.

That's bad. (IV.v.a.2) #WealthOfTweets #SmithTweets
People worry about being the "loser" in international trade, but trade that's paid for by bounties is the only kind of trade that can go on for any length of time while either side loses. (IV.v.a.3) #WealthOfTweets #SmithTweets
Because the mercantile system worries about the balance of trade and not the balance of production/consumption, its "expedients" force trade into less productive areas. (IV.v.a.3) #WealthOfTweets #SmithTweets
We have a feeling that when Smith repeatedly refers to "the ingenious and well-informed author" that he spends a little time debunking here, he's not being altogether sincere. #SmithSnark (IV.v.a.4&8) #WealthOfTweets
Of course bounties on corn exports increase the price of corn in the home market. The point of bounties on corn exports is to increase the price of corn in the home market. But people are surprised. (IV.v.a.6–7) #WealthOfTweets #SmithTweets
Corn bounties make corn (by this, Smith really means food) more expensive so the poor can't feed themselves, and bounties make hiring the poor more expensive so resources are idle. This puts a cap on population and growth.

That's bad. (IV.v.a.8) #WealthOfTweets #SmithTweets
But surely, if the price of corn is higher there will be more corn farmers and that will mean more corn!

Nah, says Smith. For him, the money price of corn regulates all other prices. Messing with it messes up everything. (IV.v.a.10–15) #WealthOfTweets #SmithTweets
Smith digresses, YET AGAIN, on silver. (IV.v.a.16–21) #WealthOfTweets #SmithTweets
This part is going to make your head hurt a little if you are familiar with price theory. There's a reason the #LaborTheoryOfValue is defunct.
For Smith, corn is super special and sets the price of everything.
For us, that is unhelpful. (IV.v.a.21–23) #WealthOfTweets
Smith still thinks country gentlemen are hapless. (IV.v.a.24) #WealthOfTweets #SmithTweets
Bounties for exporting goods that aren't corn are more successful if the goal is increasing production. So why not just pay a bounty for increased production? Smith thinks it would make more sense. (IV.v.a.24–25) #WealthOfTweets #SmithTweets
Like, he's not in favor of bounties on production. He just thinks if you're going to channel industry into unproductive channels, you could at least do it with only one tax. (IV.v.a.24) #WealthOfTweets #SmithTweets
Unfortunately, the mercantile system says that wealth comes from exports, not production. So bounties are on exports.
Plus, merchants wouldn't want to flood markets with their goods and drive prices down. Better to export. (IV.v.a.24) #WealthOfTweets #SmithTweets
OK we don't entirely get it but Smith is really preoccupied with herring. It's going to come back around later. (IV.v.a.29–35) #WealthOfTweets #SmithTweets
Are bounties ever a good idea?

National security is a reasonable public expense, so you might be able to support it by encouraging production of things like gunpowder or sailcloth in case you need to wage war with France or something. (IV.v.a.36) #WealthOfTweets #SmithTweets
Unfortunately, lots of countries are so wealthy they'll pay for all sorts of unjustified bounties because of public prejudice that supports the mercantile system.
Alas. (IV.v.a.37) #WealthOfTweets #SmithTweets
Smith is VERY concerned that we may not have paid enough attention to his thoughts on corn, so he'll be digressing on the subject tomorrow. See you then! #WealthOfTweets #SmithTweets

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More from @adamsmithworks

13 Feb
#AdamSmith, #WealthOfNations, and #CornLaws!
What more could you possibly want on a Saturday morning? (IV.v.b) #WealthOfTweets #SmithTweets
Yes, it’s the Digression Concerning the Corn Trade and Corn Laws! We can barely contain ourselves long enough to remind you that “corn” doesn’t mean 🌽 It means the principal cereal crop of a nation. (We keep saying so because we keep forgetting.) #WealthOfTweets #SmithTweets
#TLDR on #AdamSmith’s thoughts on the Corn Laws:

They’re bad. (IV.v.b.1) #WealthOfTweets #SmithTweets
Read 29 tweets
11 Feb
#AdamSmith has spent a few days talking about why the mercantile system is not a great idea in general, but today he starts to get into specifics by talking about the policies through which it's implemented. We begin today with...drawbacks! (IV.iv.) #WealthOfTweets #SmithTweets
Merchants and manufacturers are not, of course, content only to have a monopoly over the home market. They also want an advantage in foreign markets.

Also: we're calling them M&Ms now. (IV.iv.1) #WealthOfTweets #SmithTweets
M&Ms don't hold sway over foreign governments, so they've gotta settle for getting their home government to pay them to send goods abroad.
Read 13 tweets
10 Feb
#AdamSmith corrects a lot of economic errors in #WealthOfNations "Nothing, however, can be more absurd than this whole doctrine of the balance of trade," upon which nearly all protectionism is based. But we still worry about it today. (IV.iii.c.2) #WeathOfTweets #SmithTweets
Both the supposition that an even balance of trade = fair trade and that an uneven balance of trade implies one side wins and the other loses are false.

That's how he puts it. "Both suppositions are false."

We love a decisive Smith. (IV.iii.c.2) #WealthOfTweets #SmithTweets
The trap is thinking that the country that brings in the most silver and gold wins. Since bullion is the currency of international trade, exporting more than you import (having a positive trade balance) means you bring in more bullion. (IV.iii.c.3) #WealthOfTweets #SmithTweets
Read 31 tweets
9 Feb
Today #AdamSmith is talking about stuff that sounds pretty contemporary. But remember: it's 240 years old. Today it's all about attempts by the political system to manipulate the balance of trade. (IV.iii.) #WealthOfTweets #SmithTweets
The "Commercial System" that Smith is talking about here is also called the mercantile system, or mercantilism. (IV.iii.) #WealthOfTweets #SmithTweets
The gist of mercantilism is:
- If your imports and exports are equal, that's fair. But,
- If you export more than you import, you bring in silver. That's good! And,
- If you import more than you export, you pay out silver. That's bad.
(IV.iii.) #WealthOfTweets #SmithTweets
Read 20 tweets
8 Feb
Here we are in Book 4, chapter 2. It's clear that by restraining and prohibiting imports, you can give a monopoly to domestic manufacturers. But can you create wealth?

Well, we know how #AdamSmith feels about monopolies. (IV.ii.1) #WealthOfTweets #SmithTweets
In fact, Smith's not even all that convinced that prohibitions keep foreign goods out. (IV.ii.1) #WealthOfTweets #SmithTweets
Dear readers, we do not tweet the footnotes. (If that's your sort of thing, totally @ us.) But we have to draw your attention to the footnoted letter to William Eden where Smith claims that he burnt a bunch of his clothes for being illegal. (IV.ii.1) #WealthOfTweets #SmithTweets
Read 34 tweets
7 Feb
Sorry to leave you hanging there yesterday, Smithsters. There's just a lot going on in this chapter!
So we return to #AdamSmith's many grievances with the very idea of the mercantile system. (IV.i.14–45) #WealthOfTweets #SmithTweets
People worry too much about the supply of cash money. It’s easy to import more and you can always use barter instead, if things get really tight. Also, paper money is a thing! (IV.i.14–15) #WealthOfTweets #SmithTweets
But everyone complains about a scarcity of money. That’s usually because they can’t get credit, or are big spenders. Or it can be caused by overtrading. It’s not about how many coins are around, but the ease of getting them. (IV.i.16) #WealthOfTweets #SmithTweets
Read 24 tweets

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